You knew it was going to happen. Today (Tuesday) is the first day since the Feb. 11 bottom where markets have exhibited weakness though it's still modest by the declines earlier in the year.
The S&P 500 has rallied more than 6 percent in the last six trading sessions. Until today.
Here's the big question: is this weakness today normal backing and filling, or is it the start of the market rolling over again?
My bet is that this is not the start of a grand rollover, but there are plenty who are still nervous.
A lot has stabilized in the last two weeks. China. The yen is not as volatile. But oil—and the Fed's intentions—remain the big wildcards, and without stability in those two issues we have no peace in the markets.
The cause of most of today's weakness was comments from the Saudi oil minister that there would be no production cuts. On the surface, this is not interesting, since no one expected them to cut.
But that's not the way the market saw it. The market hoped that the announcement they were "freezing" production at January levels also implied that the Saudis and others would be more open-minded about doing cuts down the road.
Those hopes have now been decisively dashed. Oil dropped and took a good part of the market with it, notably bank stocks that now seem heavily levered to energy loan exposure.
For the Saudis and the rest of the producers, their calculation is pretty simple: the price of oil can't rebound too much, because then you will never get the production cuts that they want.
That's why staying in the range around $30 might work:
1) it's a floor, but there still will be production cuts as time goes on;
2) it give visibility on energy earnings—OK they're not great, but analysts estimates have been too high so if we start modeling with estimates firmly at $30 at least there's visibility, and
3) it will help with visibility on banks, which have been hit on energy loan issues.
So if oil stays above $30, there's a good chance this is indeed just backing and filling, and not the start of another huge decline.
As for the Fed, I anticipate they will update their economic outlook on March 16th and greatly lower the infamous "dot plot" and their expectations of more rate hikes. They will finally come into line with what the market already believes.
I doubt he will tip his hand, but many will be watching Fed Vice-Chair Stanley Fischer deliver his "Future of the Global Economy" speech at the very same CERAWeek forum the Saudi oil minister spoke at.
The best way to describe the markets right now might be "quiet unease." Not great, but much better than the "full-blown panic" description that we had a few weeks ago.